Greetings, and welcome to the Newpark Resources Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ken Dennard with Dennard Lascar Investor Relations. Thank you. Ken, you may begin..

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast to review fourth quarter and full-year 2020 results.

Participating from the Company in today's call are Paul Howes, Newpark's President and Chief Executive Officer; Gregg Piontek, Chief Financial Officer; and David Paterson, President of the Fluids business.

Following my remarks, management will provide a high level commentary on the financial details of the fourth quarter results and near-term outlook, before opening the call for Q&A. And before I turn the call over, I have a few housekeeping details to run through.

There will be a replay of today's call and will be available by webcast on the Company's website at newpark.com. There also will be a recorded replay feature available until February 26, 2021 and that information is included in yesterday's release.

Please note that the information reported on this call speaks only as of today, February 12, 2021, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.

In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Newpark's management.

However, various risks, uncertainties, and contingencies could cause Newpark's actual results, performance or achievements to differ materially from those expressed in the statements made by management.

The listener is encouraged to read the Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties, and contingencies. The comments today may also include non-GAAP financial measures.

Additional details and reconciliation to the most directly comparable GAAP measures are included in the quarterly press release, which can be found on the Newpark's website. And now that behind me, I'd like to turn the call over to Newpark's President and CEO, Mr. Paul Howes.

Paul?.

Thanks, Ken, and good morning, everyone. Before covering the specifics of the fourth quarter, I'd like to take a moment to reflect upon the progress we’ve made over the past year to advance our strategy.

2020 was a year in which companies around the world faced unprecedented challenges, and I am extremely proud of the resilience of our entire organization. Despite navigating the incredibly challenging market conditions, we remain focused on what we could control and continue to press forward with our strategic imperatives.

To that point, I'd like to highlight a few areas of progress. First, our 2020 results demonstrated the flexibility of our capital-light business model, which enabled us to generate positive free cash flow through all phases of the industry cycles.

For the full-year 2020, we generated $52 million of free cash flow and reduced our outstanding debt by $73 million, expanding our liquidity and ending the year with only $87 million of total debt, our lowest debt level in more than 20 years.

Second, we continue to advance our strategic initiatives to diversify our end markets, demonstrating our ability to expand in the areas that are likely to benefit from the energy transition.

More specifically, despite a significant COVID-driven slowdown and customer activities across all end markets in 2020, our Site and Access Solutions business, formerly known as Mats and Integrated Services, delivered 9% year-on-year growth in rental and service revenues from the utility sector.

Another key step we took in reshaping the Newpark was the successful repositioning of our Conroe, Texas chemical blending facility. We accomplished this by leveraging our existing assets and chemistry know-how into industrial end markets. In the face of the distressed U.S.

oilfield, we successfully ramped up production with disinfectants and industrial cleaning products, delivering $11 million of revenue for the full-year, including $8 million in the fourth quarter.

As highlighted in yesterday's press release, reflecting our continued progress in our diversification efforts, we’ve created a new Industrial Solutions reporting segment, which includes both our Site and Access Solutions business, as well as the industrial blending operation.

This segment contributed nearly 40% of our consolidated revenues in the fourth quarter, generating an operating margin of 19%. For the full-year 2020, the Industrial Solutions segment generated $138 million of revenue and $34 million of EBITDA, reflecting a 25% EBITDA margin.

Third, we’ve made meaningful progress in right-sizing our Fluids business for the new market environment, while at the same time strengthening our competitive market position. While 2020 was by far the most challenging year our Fluids businesses ever faced, we moved swiftly to right-size the business.

We reduced our work line and cost structure, harvested working capital and redeployed our Conroe facility to serve markets that can provide a stronger return, all of which reduced our Fluids Systems net capital employed by nearly $125 million, or roughly 30% during the past year.

And last, we are pleased to see increasing validation of a strategic focus on providing products that work in harmony of the environment. We are proud of our long history in providing products that help our customers across all industries, improve the sustainability of their operations.

Our fully recyclable DURA-BASE composite matting system, which compared to alternative wood mats, helps protect against deforestation, while also reducing carbon emissions associated with trucking.

Similarly, our family of high-performance water-based drilling fluids and stimulation chemical products provide customers with an optimum balance of performance and environmental benefits. The latest example of this is our blind tolerant higher-viscosity friction reducer for hydraulic fracturing.

The HVFRs differ from other products currently available in the market, which eliminates the need to use fresh water. With that, I would like to now turn to the fourth quarter results.

I am pleased to highlight that consolidated revenues increased 35% in the quarter to $130 million, driven by strong sequential improvement across both segments generating $16 million in free cash flow.

The Industrial Solutions segment contributed $50 million of revenues in the fourth quarter, which includes $8 million from our industrial blending operations. Our Site and Access Solutions business contributed $43 million of revenues, a $14 million sequential improvement.

The fourth quarter benefited from stronger direct sales, reflecting improvement demand from the utility sector, along with a 26% increase in rental and service revenues, driven by elevated utility activity along the Gulf Coast.

In the Fluids business, we are also seeing early signs of the oil and gas market recovery with revenues improving 17% sequentially, primarily driven by $8 million increase in North American land.

In the Gulf of Mexico, although we experienced some weather-related disruptions early in the fourth quarter, revenues improved $4 million as compared to Q3 as the previous quarter experienced repeated weather-related work stoppages.

Internationally, Fluids revenues improved 8% sequentially, although activities in key markets within Europe and the Middle East continually impacted by travel and operational restrictions imposed by local governments in response to a surge in COVID.

And with that, I will hand the call over to Gregg to discuss in more detail the financials for the fourth quarter.

Gregg?.

Thanks, Paul, and good morning, everyone. I'll begin by covering the specifics of the segments and consolidated financial results for the quarter before providing an update on our near-term outlook.

In the Industrial Solutions segment, total revenues increased to $50 million in the fourth quarter, including $8 million from industrial blending, reflecting a full quarter production.

Focusing specifically on the Site and Access Solutions business, rental and service revenues increased 26% sequentially to $29 million and outpaced our expectations for the quarter, benefiting from stronger activity from utility sector along the Gulf Coast.

Revenues from product sales more than doubled sequentially to $14 million for the fourth quarter, benefiting from the Q4 seasonal strength from the utility sector, although demand remained somewhat suppressed by COVID headwinds relative to the year-end strength seen in prior years.

Looking at the Site and Access Solutions revenues in total, more than 80% of our Q4 revenues were derived from non-E&P markets with the utility sector representing the largest end markets.

Comparing to the fourth quarter of last year, revenues from the Site and Access Solutions business declined to $12 million, or 22%, driven by a $14 million decline in direct sales attributable to the COVID headwinds on customer purchasing.

Rental and service revenues grew 5% year-over-year, reflecting a dramatic shift in end market mix, specifically while E&P customer revenues declined 40% from Q4 of last year.

This was more than offset by a 43% improvement from the electrical utility and other industrial end markets, which contributed a quarterly high of $22 million in revenues to the fourth quarter of 2020.

Benefiting from the stronger revenues, the Industrial Solutions segment operating income improved $10 million sequentially, contributing $15 million of EBITDA for the fourth quarter. Turning to Fluids Systems.

Total segment revenues improved by $12 million or 17% sequentially with the prior quarter results, including $2.6 million of cleaning product revenues. Revenues from U.S. land increased $4 million, reflecting the benefit of the 21% improvement in market rig count and an uptick in stimulation chemical revenues.

Improvements we are seeing across substantially all regions with West and South Texas providing the majority of the sequential improvement. In the Gulf of Mexico, revenues improved by more than 50% sequentially to $12 million in the fourth quarter, coming off an extremely challenging third quarter, which was impacted by repeated hurricane shutdowns.

In Canada, revenues more than tripled sequentially to $6 million in the fourth quarter, benefiting from a doubling of the market rig count along with the impact of customer projects economy.

Outside of North America, as Paul touched on, COVID continued to suppress customer activity in the fourth quarter where restrictions on movement of personnel and products within a number of countries most notably in Europe and the Middle East have resulted in significant activity disruptions and project delays, although international revenues improved 8% sequentially to $28 million with operations in North Africa contributing substantially all of the improvements, while revenues from the Middle East remains relatively flat at $9 million in the fourth quarter.

On a year-over-year basis, our Fluids Systems revenues declined 41% compared to Q4 of 2019. North American land revenues declined by $30 million or 42%, which is favorable to the 59% decline in market rig count, primarily reflecting the benefit of our increased market share.

Gulf of Mexico revenues remained much more stable, declining only 8% year-over-year, driven primarily by the timing of customer activities. International revenues declined $24 million or 47% year-over-year with decline seen across substantially all markets in Europe, the Middle East and North Africa, including a significant impact from COVID.

The Fluids Systems operating loss was $20 million in the fourth quarter, which included $11.2 million of charges primarily related to our previously announced exit from Brazil as called out in yesterday's press release.

As anticipated, Fluids Systems moved closer to breakeven EBITDA in Q4, benefiting from the improvement in the revenue along with the impact of our cost reduction efforts. Turning to the corporate office. Total expenses were $5.9 million in the fourth quarter, reflecting a $700,000 reduction from the third quarter.

The sequential decline is primarily driven by a reduction in estimated long-term performance-based incentives. On a year-over-year basis, corporate office expenses declined $3 million, primarily driven by a reduction in personnel costs and performance-based incentives.

SG&A costs were $20 million in the fourth quarter down modestly from the third quarter. On a year-over-year basis, SG&A cost declined $7 million, largely reflecting lower personnel expense, legal and professional spending and the benefit of other cost reduction efforts.

Interest expense increased slightly to $2.5 million in the fourth quarter, nearly half of which reflects non-cash amortization of facility fees and discounts. Our weighted average cash borrowing rate on our outstanding debt is approximately 3%.

The fourth quarter benefit from income taxes was $600,000, which reflects a 3% effective rate for the fourth quarter. The low tax benefit rate for the quarter primarily reflects the impact of the non-deductible currency loss associated with our exit from Brazil and a $700,000 charge to partially reduce U.S.

tax credit carry-forward that may not be realized. Our net loss in the fourth quarter was $0.20 per share, which included $0.12 of charges and highlighted in yesterday's press release.

This compared to a net loss of $0.26 per share in the third quarter, which included $0.04 of charges and a net loss of $0.19 per share in the fourth quarter of last year, which included $0.19 charges. Turning to cash flow.

For the fourth quarter cash provided by operating activities was $15 million, which included $11 million net reduction in working capital. The net working capital improvement was driven primarily by our ongoing efforts to reduced inventories as well as improvements in our receivable DSOs, which now stand at their lowest level since 2018.

Investing activities again had a minimal impact in the quarter, illustrating the flexibility of our capital-light business model. It's worth noting that the majority of our capital expenditures in 2020 have supported our industrial end market activities.

Benefiting from our consistent positive free cash flow generation, our total debt balance declined $15 million in the quarter to $87 million. Our primary debt component includes the remaining $67 million of the convertible notes due in December and $19 million outstanding on our U.S. asset-based bank facility, which runs to 2024.

Our cash balance ended the year at $24 million, substantially all of which resides in our international subsidiaries. At year-end, our total debt to capital ratio was 15% and net debt to capital ratio was 11%. Now turning to our near-term operational outlook.

In the Industrial Solutions segment, there is a notable recovery in activity underway, particularly in the utility sector as projects delayed in 2020 are now beginning to move forward.

As we progress through Q4, activity associated with the hurricane-driven repairs tailed off, which was largely replaced by the broader recovery in utility sector, as the industry began reengaging in projects that were previously postponed.

We expect some level of pent-up demand from COVID-driven delays and the broader recovery in the utility sector will also provide a benefit to direct sales activity while we expect Q1 to surpass the Q4 levels. Meanwhile, revenues from the industrial blending are expected to modestly soften in the near-term.

Overall, we expect Q1 operating results for the Industrial Solutions segment to remain fairly in line with Q4 performance. In Fluids Systems, we expect Q1 will build upon the early recovery we saw in Q4 with topline anticipated to improve by roughly 15% sequentially. The improvements are expected to come primarily from North American land where U.S.

market rig count is tracking more than 20% above Q4 levels and Canada benefits from the typical Q1 seasonal strength. Internationally, while we remain well positioned to participate in the market recovery, we are continuing to see COVID-related headwinds impact planned customer activity, particularly in Western Europe and the Middle East.

From a margin perspective, we anticipate the stronger revenues and ongoing cost rationalization efforts should drive the Fluid business back to EBITDA breakeven in Q1 with recovery in the Eastern Hemisphere remaining dependent upon the lifting of COVID restrictions and the startup of our secured contracts.

Corporate office spending should remain near the $6 million level in the near-term. With regards to cash flows, as Paul touched on, we've entered 2021 with our lowest debt levels more than 20 years and well positioned to meet our business needs beyond a convertible note maturity later this year.

We expect capital expenditures in the near-term to focus on industrial end market expansion opportunities that provide clear line of sight to stable cash flow and EBITDA generation.

As for working capital, we expect to continue working inventory levels down in the near-term, although this benefit will likely be offset by the increase in receivables associated with the anticipated recovery in revenues.

With the benefit of $8 million of international financing closed this week, we further reduced our ABL facility borrowings by roughly $10 million in the first six weeks of 2021. Our near-term priority for free cash flow generation remains focused on ensuring sufficient liquidity to support our business beyond the convertible bond funding.

As part of our longer-term capital structure management, we plan to continue evaluating additional sources of liquidity available. And with that, I'd like to turn the call back over to Paul for his concluding remarks..

Thanks, Gregg. There has been a lot of hard work throughout our global organization over the past year to successfully navigate the market volatility while consistently driving free cash flow. I am proud to say that we have delivered on our commitment to strengthen our balance sheet, positioning the company for success as the global economy recovers.

There is clearly more work to be done in our Fluids business and we remain firmly committed to our asset-light business model and improving our returns. As we look ahead at 2021, it's our belief that the underlying fundamentals are improving in both of our segments.

As I reflect upon our strategy and longer-term outlook, we are very proud of the progress we've made diversifying our revenues and in particular, the penetration of the utility sector over the last four years. The momentum we have developed is expecting the increase as our brand identity grows in this important market.

With this expanding presence, we also believe our Site and Access Solutions business will have increased visibility and opportunity to capture value in the energy transition.

Whether it's the connection of wind farms or solar arrays to the grid or the delivery of electricity to power our electric vehicles, our nation’s utility grid is a critical element to the success of America’s energy transition and we are excited by our expanding role.

I would also like to highlight that we recently added Michael Lewis to our Board of Directors. Michael joined our Board in January 1 after retiring from Pacific Gas & Electric Corporation.

Michael brings over 34 years of electric operations experience, most recently serving as both Interim President and as Senior Vice President for Electric Operations. Prior to joining PG&E, Michael served as Duke Energy's Senior Vice President and Chief Distribution Officer responsible for their distribution operations across six states.

We are excited to add Michael to our Board and we look forward to benefiting from his extensive experience and insights and helping to shape and define our strategy. We are also very pleased with the rapid transmission and scale up of our industrial blending business in 2020, which is now running at roughly $30 million in annualized revenue.

Our ability to identify evolving market opportunities and leverage our capability to reposition underutilized assets and accelerate our market diversification efforts is a clear reflection of our agility in an ever-changing world.

This is also a meaningful step towards reducing the asset base in Fluids Systems, creating a more agile business that can better manage investor volatility. It's worth noting that we recently reached a meaningful milestone with the majority of our long-term assets now deployed in our Industrial Solutions segment.

Going forward, we expect to leverage our capital-light business model in Fluids, focusing our future capital investments primarily on expanding our presence in industrial markets and selected international fluid opportunities.

With our successful diversification efforts over the past several years, Newpark is well positioned to capture value in the energy transition. And although we have a clear path forward to drive growth in our Industrial Solutions segment, we don't want to overlook the continued importance of our Fluids business.

We must remember that oil and natural gas are expected to continue to play an important role in meeting the world's energy demands. As the U.S. and the rest of the world transitions to claim renewable energy sources, we see an expanding role for geothermal drilling, which matches well with our Fluids Systems capabilities.

Although it's directly representing a very small portion of the energy landscape, Newpark has been working in a geothermal space for over 15 years, drilling hundreds of wells around the world. Adding to our resume, we recently began the new geothermal contract in Portugal, which compliments our ongoing work in Chile.

We expect opportunity to geothermal drilling will expand going forward and they believe that are environmentally friendly fluids, including our [TeraTerm] system designed specifically for geothermal application will help operators worldwide to tap into this clean energy source.

As I reflect our Newpark’s history, our longstanding commitment to environmental stewardship has never wavered. Over the past year, we’ve clearly seen the step change in the momentum for environmentally focused solutions, a theme that has been embedded in Newpark strategy for the past decade.

We've consistently maintained our focus on delivering products that work in harmony with the environment.

We recognized the importance for every company to do their part to make a positive impact on the environment and have always maintained the customers across the industries by increasing value on our ability to help them improve their environmental stewardship. The challenge, however, was that we were ahead of the curve.

I'd like to read a short section from the speech that I gave back in 2013, more than seven years ago, which I believe is reflective of Newpark’s commitment to environmental stewardship. “Reaching industry standards is simply not good enough in a world with different priorities, where communities demand a different set of rules.

The leaders who emerge will need to be focused on the partnership between technology and the environment to ensure that next-generation technology works in harmony with the environment and our communities.

Our customers are ongoing more scrutiny, our communities are demanding higher standards and regulations are increasing at the local, state and federal levels. I believe the future belongs to the companies that integrates both technology and the environment, and Newpark is leading the way with products of evolution and our Spill Containment System”.

Reflecting on that speech given in 2013 highlights how environmental stewardship has long been a part of our DNA, guiding our strategic focus. We were a leading ESG advocate back in 2013, and we have and we’ll continue to be a leader in ESG across all industries in which we compete.

With that, I'd like to close the call as I always do by thanking our shareholders for investing in us and thanking our employees for their hard work and dedication in Newpark as well as their continued focus on safety. We'll now take your questions.

Operator?.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question is from George O'Leary with Tudor, Pickering, Holt. Please proceed with your questions..

Good morning, Paul and Gregg..

Good morning, George..

One of your comments struck me as interesting, and I wondered if you could peel back the onion a little bit. You talked about the transmission opportunity, and as we add more renewables, I would imagine that augments the opportunity there.

Just given you can put a thermal plant or a dispatchable power plant, you could look at that more even essentially wherever you launch, if maybe an oversimplification. But on the renewable side, it needs to be where the resource exists. So I would assume the transmission opportunity is growing as we add more renewables to the equation.

I wondered if you could talk about kind of a total addressable market and then Newpark's role within that and how that may have changed since you guys first started looking at that over time?.

Yes. Certainly, George, I’d be happy to answer your question. For the last four years, we've been working diligently to penetrate the utility sector.

And with the recent momentum building behind renewables, the tie-ins of solar arrays, wind farms although have fairly long access roads that you have to have some type of environmental protection to be able to go in and out of the properties. And so the addressable market will parallel the growth of the renewables.

It's hard to kind of quantify that right now, but we obviously see that as a tailwind kind of wind at our back going forward. So pretty excited about that opportunity. And Gregg, would you like to add to that..

Yes. Just add to that. If you go back a few years and go late 2018, we kind of framed up the opportunity set that we saw in the electrical utility transmission space, and that's really unchanged. And I think what Paul hits on here is, as we continue to see the progress with energy transition, it’s leaning more and more and more on the electrical grid.

And so that just heightened the need, the stability of that market and the need for continued investment in that infrastructure..

And then, again, the growth of EVs on the distribution side, you're pulling more and more power and that creates more on the demand side as well. So we've got the upfront side - upstream side on solar arrays and wind and then you got the downstream side in terms of the EVs pulling the power. So we think we're ideally suited.

And the other thing that's interesting now that we're getting more – as we grow, we’re getting – reaching more of a critical mass in the space to bring the identity of our business and our products are growing with the big electrical operators. And so our visibility is growing.

And with that, we obviously feel better about where we're placed in that market and the success we're going to have going forward..

Great. That's very helpful framing. And then just on the balance sheet side, I think you guys are actually very well positioned on the balance sheet from a debt perspective. But I know there are concerns out there from some investors who go, okay, there’s this near-term maturity although it is convertible.

Just talk about the various avenues you have to deal with those converts.

You’ve done a great job of generating free cash flow over the last 12 months, but just what's kind of the game plan, what are the different avenues you could pursue? Just help frame that for folks?.

Yes. I think I could give – you start with the key piece that’s driven our actions this year and that's been the cash flow generation. And as we framed it up early in the year, we look to lean heavily on working capital reductions to generate that free cash flow. The business has done an outstanding job of working those down.

We still have some more work to do on the inventory side. We expect that to be a tailwind. But you see where that has positioned us. And as we mentioned, we closed another small piece of financing earlier this week, another $8 million loan in one of our foreign subsidiaries, that brings our ABL down to single digits.

And so it's now a largely undrawn facility. We've got $80-plus million of availability on that facility, and with clear line of sight on - there's another component of that $25 million or so related to our mats that we see coming back in here mid-year. So we see a fair amount of headroom right there.

Now what will be – what are our avenues here as we go forward, we'll obviously continue to evaluate.

We have talked about the various assets that we have, our operations in the international subsidiaries to add additional kind of small incremental pieces of debt to the extent that we think that that makes sense, and we'll continue to work the free cash flow generation from the business to create additional revenue..

George, I think we feel pretty comfortable that we're going to be able to handle the debt maturity on the convert via our ABL. That's really the solution, and we've done a great job.

The operational efficiencies that have been driven in the Fluids business and harvesting working capital has been outstanding and has really put us in a – I think in a really great place..

Super helpful, guys. I'll turn it back over. Thanks for your time..

Thank you, George..

And our next question is from Daniel Burke with Johnson Rice & Company, LLC. Please proceed with your question..

Yes. Good morning, guys..

Good morning, Daniel..

Let me draft off George for a second and revisit the utility markets. I think you all said, overall revenue growth in the mats service rental business directed to the utility end market by 9%. And there were some crosscurrents, obviously, COVID pressures, that you were able to overcome due to, I guess, the hurricane-related bump.

But really the question is prospective.

So looking at 2021, can you grow utility market double digits again? Or was the hurricane boost sufficient that it might be challenging to repeat that?.

No. So this is Gregg. I would say that we definitely have the ability to grow at a double-digit rate in 2021. Again in Q4, we didn't come off a particularly strong quarter in Q4, which benefited from the Gulf Coast work. But you also have to reflect on the fact that that was after two quarters that we’re seeing a pretty meaningful COVID headwind.

So you pull that back and look on a year-over-year basis, we're exiting the year on a pretty strong point with growth year-on-year and set up well for continued growth in 2021..

Got it. Okay. Maybe one follow-up to Gregg. I mean, is the exposure to the utility market continues to grow, I mean, is there any change in the appetite of the mix between sales and rentals that you always contemplate? And I know you mentioned that the pretty healthy spill over into Q1 2021, you could see.

But this question, I guess, I'm asking over a bit of a longer horizon..

Yes. So, as we move into the utility space, first of all, from our perspective, we'll provide that offering to our customers, whether it'd be a direct purchase or rental, and that really comes back to their specific needs and economics, et cetera. But we are more than happy to provide both.

Now what we find is relative to our historical oilfield, the oilfield business was a rental business, I mean because of the short-term nature of it. And what you find here in the utility space is there is a larger purchase component to it. So we would think that over time, that sale component becomes a larger piece of the mix.

And if you think about that, that makes sense because they have a longer-term sustained need that they have for the product to maintain their infrastructure..

Yes. The other point too, it's beneficial to continue to sell our products into the utility sector. What it does is, it creates more brand identities, more brand equity. And if you look over a longer period of time and some of the mask advantage then you create a continued need to replenish that fleet.

So our goal is to continue to build out the market side of it from the sales perspective, but also they're running parallel, the most efficient operation in terms of access and site solutions..

Got it. Understood. That's helpful guys. And I suppose, let me pivot to you then with the Fluids business. And I guess – the question I'd like to ask is, still kind of hard to see exactly when COVID impacts dissipate internationally.

But can you take margins meaningfully above breakeven EBITDA without recovery in the Eastern hemisphere?.

Yes. Good morning, Daniel. This is David Paterson. Yes, absolutely. I think the Eastern Hemisphere historically it’s been most profitable parts of business. And we are still seeing some lingering impacts of COVID coming out of Q4 and then Q1 and I think travel disruption, project [indiscernible] are being delayed slightly.

And our customers are learning to live with COVID and we are starting to move the volumes and contracts are late in the quarter. We’d see I think stronger tailwind possibly into Q2 and second half of the year.

I think with the rich pipeline contracts we have, I think [indiscernible] margins and certainly need to improve, I think Q2 and H2 going forward..

Yes. As we look out here at Q1 in the near-term, obviously the North American land improvement, where we face with the recovery there are key to getting back to that breakeven level. But you look beyond that that international component is a very meaningful piece to driving the profitability going forward..

Okay. All right, guys. I'll leave it there. Thank you for the comments..

Thank you..

[Operator Instructions] Our next question is from Bill Dezellem with Tieton Capital Management. Please proceed with your question..

Good morning, Bill..

[Indiscernible].

We’re having a tough time hearing you..

Bill, real quick, we are having a hard time hearing you here at Newpark. All the other callers [indiscernible] pretty clear. Maybe redial in..

Okay. I'll call on later..

Yes. We’re having hard time.

Operator?.

There are no further questions at this time. And I'd like to turn the floor back over to management for closing remarks..

All right. Thank you once again for joining us on the call and for your interest in Newpark, and we look forward to talking to you again at the end of the next quarter..

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day..